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Prepare a statement of cash flows using the indirect method.

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

 

Exercises

 

E13-3. Cushenberry Corporation had the following transactions.

 

 

  1. Sold land (cost $12,000) for $15,000.

 

  1. Issued common stock at par for $20,000.

 

  1. Recorded depreciation on buildings for $17,000.

 

  1. Paid salaries of $9,000.

 

  1. Issued 1,000 shares of $1 par value common stock for equipment worth $8,000.

 

  1. Sold equipment (cost $10,000, accumulated depreciation $7,000) for $1,200.

Instructions

 

For each transaction above, (a) prepare the journal entry, and (b) indicate how it would affect the statement of cash flows using the indirect method.

 

E13-4. Gutierrez Company reported net income of $225,000 for 2015. Gutierrez also reported depreciation expense of $45,000 and a loss of $5,000 on the disposal of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses.

 

Instructions

 

Prepare the operating activities section of the statement of cash flows for 2015. Use the indirect method.

 

Problems

 

P13-3A.The income statement of Whitlock Company is presented here.

 

Additional information:

 

  1. Accounts receivable increased $200,000 during the year, and inventory decreased $500,000.

 

  1. Prepaid expenses increased $150,000 during the year.

 

  1. Accounts payable to suppliers of merchandise decreased $340,000 during the year.

 

  1. Accrued expenses payable decreased $100,000 during the year.

 

  1. Operating expenses include depreciation expense of $70,000.

 

Instructions

 

Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2015, for Whitlock Company, using the indirect method.

P13-7A.Presented below are the financial statements of Nosker Company.

 

Additional data:

 

  1. Dividends declared and paid were $20,000.

 

  1. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.

 

  1. All depreciation expense, $14,500, is in the operating expenses.

 

  1. All sales and purchases are on account.

 

Instructions

 

  1. a) Prepare a statement of cash flows using the indirect method.

 

  1. b) Compute free cash flow.

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